Cash Squeeze at Tesla, SolarCity | Hacker News Reader

Cash Squeeze at Tesla, SolarCity

wsj.com

121 pointsendswapper101 comments

Tesla has a great credit facility backed by Goldman and Deutsche bank.

Unfortunately, those lenders just made Telsa amend their ABL (Asset backed loan) such that when the Solar City deal goes through Solar City will need to be firewalled off from Tesla for purposes of borrowing money.

Essentially the lenders have made Tesla agree that Solar city would not be a subsidiary of Telsa for purposes of borrowing on their ABL.

I've never seen this type of provision before and I dont' think Telsa expected it when they initiated the merger.

Solar City had to issue debt for an 18 month term at 6.5%. With today's markets those are almost loan shark terms. I think its telling that with so much cash sloshing around, Musk had to step in and buy so much of the issue.

With Tesla's credit rated in junk bond territory and both Solar City and Tesla needing large chunks of cash in the next year, it looks like Telsa is going to have to tap the equity markets again.

Hopefully the markets continue to believe in Musk. If not I'd expect Musk to be talking to Washington about a government backed loan.

Couple this cash crunch for two of his companies along with the Space X rocket explosion today, I can't imagine the amount of stress Musk is under right now!!

>Solar City had to issue debt for an 18 month term at 6.5%

HackerNews tends to rip on the "bankers" for deceptive practices during the mortgage crisis. Yet SolarCity is offering unsecured and untransferable bonds, directly to the public, and on the front page is comparing the available interest rates to savings accounts and GICs:

https://solarbonds.solarcity.com/

With the financial situation as you describe, there is far more risk involved in buying these bonds than a savings account, so the appeal to the high rate of interest is not a fair comparison. I'm curious what people here think about this practice.

untransferable bonds

There's such a thing???

Sure enough, found with Google, and evidently they've been doing this for a couple of years: https://solarbonds.solarcity.com/customer-agreement/

The Solar Bonds I purchase may not be listed or traded on any secondary market or exchange, and even if they are, they may not be actively traded. As a result, I should assume that I may have to hold the Solar Bonds until maturity. Also, because I am purchasing the Solar Bonds directly rather than through a broker or other financial intermediary, it may be more difficult for me to sell my Solar Bonds, even if a trading market is or becomes available.

I suppose if you view them as you should any crowdfunded thing, don't expect anything back, but you're hoping to help something you believe in, that's OK, but....

This is beginning to sound like a greener version of Enron.

Green that will be entirely in the red within 6-8 quarters.

It's already very in the red, and will continue to be for the foreseeable future.

they're backed by customers paying electricity bills. seems safe for 18months, as I don't see much risk for a whole tranche of credit worthy homeowners electing to turn off their electricity.

*edit swypo

If the interest rate of 6.5% is high, which as far as I can tell is the case, i.e. it appears to be in the lower range of "junk" bonds, and they're unmarketable, and (here it gets iffy due to the acquisition) Musk and company had to buy most of their latest offering, they're by definition risky. The very first detail, their interest rate, tells you that, for no one pays more money to borrow money than they have to.

And, BTW, SpaceX just had a rocket and its payload go ka-boom on a launchpad pre-flight test.... Musk's attention and potentially capital just got a huge distraction.

See also https://news.ycombinator.com/item?id=12405092 , Tesla's lenders did not act favorably towards the merger.

Ah, and see this in particular: https://news.ycombinator.com/item?id=12406715

Math and physics are seldom friendly to "green" efforts.

SpaceX is hardly green, I would imagine. That doesn't change the realities of what they're up to.

I don't support the green label on solar panels that are only profitable because of government dole. However, I still believe the methodology for determining risk (internal to SolarCity) to be sufficiently safe (for me to invest). I'm familiar with what they're up to, though.

Could it be the case that a 6.5% rate reflects the risk, but also the difficulty of securing operating funds. e.g. a sweetened deal for those willing to support them.

I'm interested in finance, but not a financier... so, my opinion could benefit from correction.

Wait -- the only reason you would want to hamstring the bonds' liquidity like that is if you expected their open-market price to be lower (interest rate to be higher) than when bought straight from SC. Meaning the expect the risk/rate combo to be a bad deal?

Am I missing something?

For me, the only part that might be unethical is when they say "controlled risk." And then don't describe how the risk is controlled at all on the hyperlinked page. How is it controlled? Where am I in the pecking order if things go sour?

The entire solar city enterprise is based on "sophisticated financial engineeriing." They push solar lease and PPA deals on customers which are then securitized and sold to investors. Both sides of these deals (solar customers and abs investors) accept terms that benefit solar city at their expense. If it's not subprime 2.0 then it's subprime 3.0.

And somehow even with favorable terms Solar City is hemorrhaging cash and has a grim outlook for the future.

Sales and marketing expenses. Cut those and SCTY is cash flow positive.

But then revenue plunges and its value plunges accordingly thanks to negative growth rates.

Which is where Tesla comes in with its existing marketing and sales channels. And why it's a sound strategy to acquire SCTY.

> there is far more risk involved in buying these bonds than a savings account

Please forgive my ignorance on this. I think there is a high potential that SolarCity will do well after merging with Tesla so I see these bonds returning good returns.

>so I see these bonds returning good returns.

Then why offer interest rates many multiples higher than other low-risk investments? Of course they might pay off (in fact, it's probable that they will). But it certainly isn't riskfree, like a savings account.

These statements need to be backed with skin in the game. How much are you willing to invest in these bonds? Would you transfer your current savings account all into these bonds?

These bonds are medium risk... you get all of the downsides of when they go bankrupt but none of the upsides of if they become wildly successful.

But...they're bonds.

If everything goes absolutely swimmingly, you will not make more than 6.5 percent on your investment. They're not going to give the bondholders a tip/bonus/whatever.

If you believe that Tesla + SolarCity is going to be a powerhouse, I'd consider buying the stock instead. Alternately, if you're looking for a 6.5 percent return, there are less risky ways to get it (it's about the expected annual return from a broad index fund).

I'm honestly not sure who these bonds make much sense for. The implied bet is something like "they're not going to do great, so the stock will not rise, but they also will not go bankrupt so I will get my principal back." On the other hand, if you are emotionally invested in the idea of self-driving solar powered electric cars and are willing to tie up some money to make that dream come true...I can see the appeal. (I own a tiny bit of TSLA for the same reason).

I have no problem with it, because buying these bonds is completely voluntary (and indeed, anyone foolish enough to buy a non-transferrable corporate bond deserves what's coming to them).

The reason--at least, my reason--for ripping on "bankers" is because our entire system of money is founded on bonds and thus, debt servitude. No one asked me if I wanted every single dollar to be created in parallel with a debt instrument, and no one asked me if I wanted to have my income taken away to service that debt.

It all comes down to autonomy. People have a choice to purchase Solar City bonds, but our banking system is forcibly imposed upon people by an unelected, private entity.

Tech Tribalism

I'm pretty sure the market has been expecting another Tesla cash raise at some point before the Model 3 launch. Maybe not one that is happening quite this soon, but I don't think this is a major shock. I expect this might be a larger hit to their share price than other cash raises because of that + SolarCity, though.

Is there an article that discusses Tesla needing to be firewalled off from Solar City for financing reasons?

I hadn't heard that before, but am interested in learning more about it.

> Couple this cash crunch for two of his companies along with the Space X rocket explosion today, I can't imagine the amount of stress Musk is under right now!!

Self-induced stress. There is no reason for Tesla to have purchased Solar City. It was an extremely financially stupid and ego-maniacal deal, and the fact that financial institutions want protection against it just proves it. If there is ever a moment that people turn back and ask why Tesla failed, it will be this. I don't think Tesla as a company will disappear, but I can definitely see Musk losing control because of financials spinning out of control, and this would be the jump-the-shark moment.

Self-induced, yes, but not stupid, and there is a reason.

Egomaniacal, narcissistic, who cares? There is decent consensus that these qualities benefit (https://hbr.org/2012/07/narcissism-the-difference-betw, http://www.psychologicalscience.org/index.php/news/minds-bus...) entrepreneurs and leaders.

The reason is that as a single unit the combined companies are a much more compelling offering as a next-generation energy company managing, both supply and demand of a sustainable, renewable resource. I'm not aware of anyone doing this strategically, building bridges from both the supply and demand side, and at this scale.

The article is an interesting example of how entrepreneurship, and any startup battles similar issues with growth, debt and financing, regardless of the financial position, or level of influence of the founder. All the more reason not to be disheartened when facing challenges of a similar nature, though likely at a different scale.

Master plans 1 and 2 from Musk have been large in scope, practical, achievable steps towards what I think is the moonshot, which is a renewable energy ecosystem for the future.

It's not at all clear to me that power generation via solar has anything at all to do with supplying electricity to cars.

The power generated can be used for anything. The vast majority will go to things other than cars.

Electric cars can consume electricity from any source and, at least for a while, the vast majority will be coming from sources other than solar.

Vertical integration can make a lot of sense in weird markets where goods aren't fungible or there isn't a high quality market for trading. Electrical power is basically the opposite of this though. There is a very very large and very liquid market for pricing electrical power. I see no reason that SolarCity can't just be a supplier to this market while Tesla Owners would be consumers.

It's pretty clear to me that the merging of the companies is mostly due to cashflow management on the part of Musk and has little to do with any real synergies between their businesses. Stockholders in one or both companies are likely to suffer due to the merger.

Electric cars represent a substantial demand for electricity. Solar represents a cost-effective renewable supply of electricity. The two do go hand-in-hand.

"Vertical integration can make a lot of sense in weird markets where goods aren't fungible or there isn't a high quality market for trading. Electrical power is basically the opposite of this though. There is a very very large and very liquid market for pricing electrical power. I see no reason that SolarCity can't just be a supplier to this market while Tesla Owners would be consumers." Yes, but the point is that there is a reason to combine those two, if the long-term agenda is to create a next-generation energy company, as opposed to simply competing in their respective markets, which was a response to pfarnsworth's comments.

I do agree with the likelihood of certain shareholders being negatively affected. You are also probably right about the motivation being cashflow, but that is due to circumstances/timing rather than a lack of synergy.

Airline companies represent a substantial demand for jet fuel but you don't see them merging with oil companies. Because there is a deep, liquid market for jet fuel. Just like electricity.

If they could convince an oil company to do so they might.

Given that, "there is a deep, liquid market for jet fuel," is having Emirates airline and Emirates National Oil Company under the same umbrella poor strategy?

You're also omitting the fact/point that the energy industry is evolving very quickly and that calls in to question the established markets. Energy over-supply in general creates opportunities for disruption and new business models.

is having Emirates airline and Emirates National Oil Company under the same umbrella poor strategy?

Yes. The only reason it exists this way is because they're both owned by the corrupt government/monarchy of Dubai.

Keep in mind that under the same umbrella you also have everything from banks to a cement company to hotels to a mineral water company. This isn't a coherent business strategy, it's just what happens when a single family rules over an entire economy and basically owns everything.

Why is it poor strategy beyond liquid markets for jet fuel?

You could equally argue that is exists that way because they need to deploy extremely large amounts of capital. So, an infrastructure company in a region that is going through phenomenal, albeit temporary growth, makes a lot of sense. Once that growth levels off they could transition to higher-tech endeavors.

One counter example is that Delta bought an oil refinery for this reason. https://en.wikipedia.org/wiki/Trainer_Refinery

> Airline companies represent a substantial demand for jet fuel but you don't see them merging with oil companies

They are creeping in that direction though. Delta purchased their own refinery in 2012:

http://www.reuters.com/article/us-delta-jetfuel-exclusive-id...

If you read your link it explains why this sort of vertical integration is almost certainly a bad idea. Delta can't capture all the gains that the refinery creates by operating in ways that reduce its effectiveness. It's money losing overall.

> It's not at all clear to me that power generation via solar has anything at all to do with supplying electricity to cars.

Tesla is a battery company that just so happens to also make a couple of cars. When you look at it that way, it makes a lot more sense.

This actually makes sense. And perhaps SolarCity will also become a battery company that just so happens to also make solar panels because solar power turns out to be more of a storage problem than generation problem.

You are making me rethink my position a little bit. Thanks!

>Tesla is a battery company

What advantage do they have in battery tech that say, Panasonic (who provides their batteries), doesn't?

Government backed/funded manufacturing facilities based in the US

Tesla will be the owner of the gigafactory, a factory in which Panasonic will own a small portion of the manufacturing space inside. I suppose an advantage here is the willingness for the two companies to work together.

Demand. No one is clamoring to buy Panosonic batteries. They are clamoring to buy Tesla vehicles (which so happen to require quite a few cells).

Total Tesla sold battery capacity is about 10 GWh. For comparison, Nissan has sold 6 GWh, and Chevrolet has sold 2 GWh. But all are beaten by Toyota, who have sold more than 17 GWh in their hybrid vehicles.

For further comparison, the total capacity of existing pumped hydroelectric storage plants is 740 000 GWh. (This puts plans of battery-based electricity storage in a rather harsh perspective.)

Do you have a reference for the hydroelectric storage number? Does this include hydroelectric dams without reverse-pumping capability, which still do have the capacity to perform fast grid leveling?

https://en.m.wikipedia.org/wiki/Pumped-storage_hydroelectric...

I believe this number only includes dams with reverse pumping. The global production capacity for all hydroelectric power is much larger, but it's not a widely used number, since you typically don't empty a reservoir due to the lower water having less potential energy.

So this capacity number is a bit theoretical, since you wouldn't use it that way in practice. But then again, so is the capacity number for batteries, since you really want to avoid doing a full discharge.

Annual global hydroelectric production is a more useful number, and is a little more than 4 000 TWh.

Cool, thanks. I wasn't aware that pumped hydroelectric had this great installed capacity. Those are very big numbers. Of course, it isn't an either/or proposition, since pumped hydroelectric is limited by geography. Battery-supported grid levelling can also be installed locally at each residential solar project, which makes adoption less of a political case.

These things all have different growth rates. You might want to mention those, too.

>Demand. No one is clamoring to buy Panosonic batteries

Tesla is.

Tesla is an energy company that just happens to make cars, batteries, and solar panels. Or so they would like to be.

If you look a the energy industry now, there's an iron triangle, if you will, between fossil fuel extraction, electric utilities, and the automobile industry. Tesla is aiming to replace all three sides with solar, batteries, and electric cars. A person could use Tesla products and, in theory, not interact with the current energy sector of the market at all. Which, if it works, would be some kind of disruption!

"Tesla is a battery company "

That is common misconception. Tesla repackages batteries bought from Panasonic.

The difference is that solar power works best with battery storage because it's not continuous, so Tesla's vehicles can benefit from that source more easily than most other consumers.

the Powerwall product uses the same battery for home storage.

also, a sweet deal like: "charge your electric car for a discounted rate m when your home already has SolarCity brand electricity" is a much easier sale than "Oh, you've got a Tesla... don't you want to charge it with your standard meter rate from Vivent?"

> There is a very very large and very liquid market for pricing electrical power. I see no reason that SolarCity can't just be a supplier to this market while Tesla Owners would be consumers.

I suspect SolarCity's microgrid program and system service contract (which allows for customers to participate in yet-to-be-developed markets) is intended to disrupt the whole shit. IIRC, SolarCity already purchased a utility company. I expect they're looking to buy more utility poles & make their own market, cash squeeze realities notwithstanding.

> Egomaniacal, narcissistic, who cares? There is decent consensus that these qualities benefit entrepreneurs and leaders.

It's possible that they benefit leaders on average but can also cause black-swan cases of terrible decision-making, which I think is the argument against the SolarCity purchase here. Tragic flaws and all that.

> I'm not aware of anyone doing this strategically, building bridges from both the supply and demand side, and at this scale.

I mentioned this in a previous comment about the SolarCity merger: most people agree it makes sense strategically. We're wondering whether it's a good move tactically, for a company in a stable-but-iffy cash flow situation to buy another company that was hemorrhaging cash and wasn't expected to continue as a going concern for much longer.

What are the alternatives? I think we can make an objective judgment on this tactic vs. any other?

The safe alternative (from Tesla's perspective) would have been to let SolarCity die. That's why people are questioning Musk's actions on this deal: they look like he's putting his own interests ahead of Tesla's.

First, my point is that there is a larger objective where synergy between the companies exist and serve a strategic purpose. Namely, each is a component in building a next-gen energy company.

So, the tactics Analemma_ 50 and I are discussing are what other sustainable, renewable supply options exist. Because that is what SolarCity represents. Does it make sense to buy troubled SolarCity before they go under, or does it make more sense to buy another solar (or insert renewable here), or does it make more sense to start over on that component. Those are the alternative tactics I am interested in, which I am not aware of.

>>building a next-gen energy company Agreed. They're aiming for GE, not GM. (to repeat myself from the last thread on TSLA)

>>Does it make sense to buy troubled SolarCity before they go under

From an investment standpoint, I think optimally you let Solar City go into bankruptcy, buy it for pennies on the dollar, and then you cherry pick the components you want and sell off any others that you think you can. Can someone do that as a chair of both though, not sure (i guess so?).

Maybe they didn't do that because they see someone else coming in - a new challenger? Or, he sees long term something that others don't. Or maybe he's just ego-maniacal.

All fair options, but sacrificing one group of shareholders for another seems to carry its own risks.

> It was an extremely financially stupid and ego-maniacal deal

Maybe. But also maybe, it's breaking the conventional wisdom that has gotten him where he is today.

> I can definitely see Musk losing control...

I am sure investors would be super careful of doing that. Specially now, when we remember what happened to Apple when Steve was expelled.

>there is no reason for Tesla to have purchased Solar City. It was an extremely financially stupid and ego-maniacal deal...

I think you're speculating. There are lots of plausible reasons. For example, see S+C's Alex Danco's series on this: https://medium.com/@alexdanco/in-a-world-of-energy-mainframe...

Could it all go horribly wrong? Well sure, of course. But that doesn't mean that the Tesla board is composed of idiots.

edit: See also this thread, related: https://news.ycombinator.com/item?id=12402366

>I think you're speculating.

There are many solar companies. Perhaps there are synergies with Tesla. But why SolarCity, specifically? What was outstanding about them as a target?

It's silly to expect someone to prove the point for you. Either argue why SolarCity wasn't a good choice or go ahead and assume that Elon Musk isn't a total idiot and had good reasons to buy it.

Errrr, it's haemorrhaging cash? There are plenty of other solar companies that don't have those overheads and would be cheaper.

>It was an extremely financially stupid and ego-maniacal deal

Care to provide any evidence of this? Some analysis of the solar industry in general and what made Solar City especially bad? What's the insight you have into Musk's overall strategy and why do you feel like this merger is contrary to that strategy?

>There is no reason for Tesla to have purchased Solar City

They are releasing giant battery packs for homes. This seems like a pretty good reason to also have a solar solution to work with them, considering that just storing energy from the grid is sort of dumb. There are places with variable pricing but I can't imagine a Power Wall would ever offset those price differences.

Is there a possibility this was pushed by the banks in an effort to drive them back to the equity markets for more, at a reduced price?

I'm not very knowledgeable about how that stuff works but it almost seems like a power play setup vs just a bank innocently managing their risk.

>vs just a bank innocently managing their risk

I wouldn't overthink things. Revolving credit facilities like Tesla has are very common and typically secured. It's not entirely clear to me what "firewalled" means, but adjusting terms in the wake of a merger/change of control event is to be expected.

Tesla had drawn $678 million under the agreement as of June 30, and had several billion in assets (inventory, machinery etc.) pledged against this and various other credit agreements.

What some might not realize is that although Tesla are doing very well from a PR perspective, they are still massively cash flow negative, even at the operating level (i.e. excluding capex). Solar City is even worse (-$741 million operating cashflow last year and -$2.47 billion including capex).

These are numbers that any loan officer would be wary of.

Totally agree. The entire solar space is over leveraged - there is already an oversupply issue on the solar module space, and nobody has figured out a consistent business model(s) that make sense over the long haul. One hiccup in the overall economy will send many of these companies into bankruptcy. There will be a ton of assets available for investors to scoop up, ala Sun Edison.

Makes, sense--thanks for the clarification.

> Hopefully the markets continue to believe in Musk. If not I'd expect Musk to be talking to Washington about a government backed loan.

Or when it's too big to fail.

The point really should be that he's taking a risk and it's probably a calculated one. Everyone takes some risk or the other in their lives. Therefore, it follows that if the idea fails, or the execution fails, then the company must fail regardless of the emotion behind it. I don't see why taxpayers have to fund failed ideas if it comes down to it.

Having said that, I hope that Tesla succeeds and continues to change the automotive market.

"With Tesla's credit rated in junk bond territory and both Solar City and Tesla needing large chunks of cash in the next year, it looks like Telsa is going to have to tap the equity markets again."

Didn't they just (effectively) get a ~500 million dollar interest free loan in the form of the hundreds of thousands of model3 pre-orders that were placed ?

I would have thought tesla was relatively cash rich these days.

Ouch. I hope that things pull through. He is taking so much risk on with the SpaceX program, Solar City, and Tesla. I feel like it is a crazy risky bet which will either pay off very well or leave him totally broke.

>leave him totally broke.

It might wipe him out, but people like Musk don't stay broke for long. Far too clever.

Clever doesn't pay the bills, but if [successful and world-renowned entrepreneur] wants to start a company, investors will beat down the door. Guy could end up dead broke, launch a Kickstarter the next day, and meet the funding mark by dinner time.

> totally broke.

I would be absolutely shocked if he doesn't have 10MM stashed away somewhere. No longer a billionare? Sure. But broke, no.

Furthermore, he could easily net several million a year just in speaking and consulting fees.

plus book and movie deals.

Ever since hearing about him, I've worried he may end up like this guy :$

https://en.wikipedia.org/wiki/William_C._Durant

Elon Musk ends up slinging hamburgers and running a bowling alley to make ends meet? That would make a good headline.

Wow, there have to be some investment banker of the year awards for whomever convinced him and Rockefeller to bail them out after it was blatantly obvious the entire market was on fire.

It's telling that when it happened again in 2007 the problem had grown so big that not even sucker billionaires could help, they had to be bailed out by the federal government. This time the sucker was the American people.

Fun fact: Musk has said that he came up with the idea for SolarCity at burning man.

https://en.m.wikipedia.org/wiki/Elon_Musk#cite_note-KQED-Sol...

Good short potential on Musk's bonds.

This is a crazy idea, but why cash cow Apple lend some money to Elon & Co.? It should be a win-win situation (Apple takes a share of Tesla and perhaps tapping into Tesla's core EV tech/batteries production capability) and Tesla get to alleviate the cash situation.

Ultimately, Tesla and Apple must join forces in order to advance / accelerate the sustainable transportation.

If Apple really wanted Tesla's assets they should wait until the 11th hour and swoop in with a rescue package, or let them slip into bankruptcy and buy up the assets individually.

Perhaps that's too late?

The Tesla Power Wall is designed to store electricity generated by Solar City's solar panels.

The Tesla Power Wall and the Tesla battery pack for the car are very similar except one is larger and goes on the car and the other is smaller and goes on the wall.

Solar power is not useful without having a way to store it.

It is amazing how difficult it is for people to see the connection between these systems and that these are complementary products that are part of the same vision.

Wall Street doesn't like long term Capital Expenditures. They can only see to the next quarter.

For proof, go look at railroad companies. Same thing. Everyone knows the railroads will have periods of very high CapEx, yet they still only care about the current quarter.

These articles are common for any company doing massive infrastructure projects. Raising capital is a business decision. Sure, he could wait a few years until he has the money to build the infrastructure (megafactory) he needs, but that's not how you grow a company at the speed it needs to.

Also, I didn't read the article, I refuse to visit WSJ.

Wall Street has no problem with long term capital expenditures (bonds are at very low rates!), just when the parent company also does dumb stuff like burn up their very needed cash by buying an unrelated firm that is losing money very quickly (Solar City).

I don't think they're buying solar city, isn't it a pure stock swap?

The big issue is that SolarCity is barely hanging on while Tesla has been on a tear (at least PR wise), so hanging an anchor around its neck seems silly. Everyone was expecting Tesla to need to raise cash to scale model 3 production, so this wouldn't have been news is SolarCity weren't in the picture.

TSLA stock is liquid, therefore Tesla giving away TSLA stock to SolarCity stock holders is buying SolarCity.

But SolarCity stock is also liquid so it's more like a currency exchange.

Do you think Facebook didn't buy WhatsApp either? Edit: there was a cash component, but it was 75% stock. The acquisition of Pixar by Disney is an example of a 100% stock payment.

> I don't think they're buying solar city, isn't it a pure stock swap?

Yes, but SolarCity is losing $300 million per quarter right now. Who do you think will pay that bill?

Tesla will, now that they "purchased" it. In fact, some companies sell themselves for for NEGATIVE dollars (aka, we'll pay you to take this failing business off our hands). Becoming the "owner" of a failing company means that you now have to pay for it.

So instead of issuing shares to raise capital for Tesla they are giving them to SCTY shareholders (of which Elon is the largest!) and then taking on Solar City's debts and hugely negative cash flow. As if that is not enough we're now back to Tesla needing more money and having to go raise it.

I think the thought process is if they needed cash so badly they shouldn't have just bought a bottomless money pit.

Refusing to hear out opinions you expect to disagree with isn't healthy. I don't care for the WSJ's biases either, but I'm going to at least look at their arguments.

I find myself in general agreement with the WSJ stuff I read, but I still hesitate to visit that site because it's obnoxious.

Which biases are you talking about? The right-wing bias of the editorial pages or the left-wing bias for the news part of the paper? According to this study, the WSJ's news section is more left-wing than the NYT and other newspapers. See p. 24. http://web.archive.org/web/20061128014117/http://www.polisci...

>Everyone knows the railroads will have periods of very high CapEx

I've seen analysis that demonstrates that even if Tesla weren't spending elevated levels of CapEx, and were instead spending industry average (about 5% of revenue), they'd still be losing upwards of $10k per car.

There's this sentiment that gets going that "numbers don't mean anything", and thus people are willing to buy shares in companies like TSLA at any price because "it's growing". And, sure, it's difficult to predict what a fast growing company will look like in 5, 10, 20 years. But you can model such things based on potential revenues and margins and market cap and other financial metrics. We have tons of data from tons of companies. And we know there are reasonable limitations (Tesla won't sell a trillion cars, for example).

Has anyone here ever modelled what "best-case" TSLA looks like? What do you think shares are worth?

If you compare to established, successful car companies like Ford or Honda, the best case scenario for TSLA is of the order of 2x-5x increase in market cap. And you might see more dilution to get the Model 3's rolling. So buying TSLA today isn't like buying Apple in 2005, but it might be like buying Apple in 2012.

Things get interesting if you look at $TSLA as an energy company of which cars is just one component.

There will be plenty of additional dilution if Tesla is successful, and not just for Model 3. Tesla's manufacturing ambitions and capital requirements are huge; the company will not be satisfied until they are selling millions of cars per year and selling much more battery storage per year than most casual observers would think reasonable. In a low interest-rate climate, this is a great situation to be in.

With that in mind, the best-case possible market cap ceiling is much greater than 5x the current. Tesla is not limited to car manufacturing only. And even then, the best-case scenario leaves a hole in car manufacturing capacity as some of the existing car manufacturers are unable to adapt to a future where electric vehicles will be obviously better than fossil-powered for most use cases.

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